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Cheese Output Down Slightly in July

by Lee Mielke`

Published: Friday, September 15, 2023

The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."

You'll recall July milk production was down .5% from July 2022 and July's Dairy Products report shows the result. Cheese production totaled 1.162 billion pounds, down .7% from June and down .7% from July 2022. Output in the first seven months of 2023 totaled 8.2 billion pounds, up just .3% from 2022.

Wisconsin vats produced 291.7 million pounds of the July total, down 1.9% from June but 2.4% above a year ago. California, with 202.3 million pounds, was down 1.7% from June and 4% below a year ago. Idaho provided 86.8 million pounds, down .4% from June but 1% more than a year ago. New Mexico, at 82.8 million pounds, was up 3.9% from June and 4.5% above a year ago.

Italian cheese output totaled 481.6 million pounds, up .2% from June, but 1.5% below a year ago. American output, at 475.2 million pounds, was up .3% from the June count which was revised down 4.8 million pounds, and was up .2% from a year ago. To date, American output stood at 3.4 billion pounds, up 2.3%. Mozzarella totaled 382.2 million pounds, down 2.6% from a year ago.

Cheddar output slipped to 331.5 million pounds, down 6.5 million pounds, or 1.9%, from June, and down 8.7 million, or 2.6%, from a year ago. YTD Cheddar was at 2.4 billion pounds, up 2.5% from 2022.

Butter production fell to 157 million pounds, down 5.1 million pounds, or 3.1%, from June, but was up 5.2 million pounds, or 3.5%, from a year ago. YTD butter stood at 1.3 billion pounds, up 4% from a year ago.

Yogurt production totaled 396.2 million pounds, up 4.3% from a year ago.

Dry whey production totaled 88.2 million pounds, up 2.7 million pounds, or 3.1%, from June, and up 2.9 million, or 3.4%, from year ago. YTD whey stands at 554.2 million pounds, up 2.3%. Stocks grew to 86.9 million pounds, up 3.2 million pounds, or 3.9%, from June and up 14.8 million, or 20.6%, from a year ago.

Nonfat dry milk output dropped to 134.9 million pounds, down 43.1 million pounds, or 24.2%, from June and down 30.8 million, or 18.6%, from a year ago. Stocks fell to 283.3 million pounds, down 15.4 million pounds, or 5.2%, from June, and down 49.8 million, or 15%, from a year ago.

Skim milk powder production jumped to 62.6 million pounds, up 25.2 million pounds, or 67.3%, from June, and up 1.6 million, or 2.6%, from a year ago. The report is viewed as bullish for cheese and powder and bearish on butter.

Strengthened some by the report CME block Cheddar climbed to $1.9625 per pound last Wednesday but closed the second Friday of September at $1.9250, down 2.50 cents on the Labor Day holiday shortened week and .75 cents above a year ago.

The barrels saw their last Friday finish at $1.8275, 4.25 cents lower on the week, 10.50 cents below a year ago, and 9.75 cents below the blocks. There were only three loads of block traded on the week at the CME and two of barrel.

Aged cheese is abundant, says StoneX Dairy, but fresh cheese remains tight and the futures market seems to know that. At some point, presumably, there will be more fresh cheese available, but we don't appear to be at that place yet.

Milk availability continues to tighten in the Midwest, according to Dairy Market News. Cheesemakers say several milk handlers have "gone silent on offers." Spot loads at mid-week were reportedly $1 over Class III or higher. Cheesemakers are growingly concerned about meeting demand, particularly Mozzarella and pizza cheesemakers. Excessively available milk throughout the winter and spring kept cheesemakers very busy but that's not the case currently.

Retail and food service cheese demand is strong to steady in the West. Exports are moderate. Class III milk demand is strong by most cheese manufacturers and milk is in good balance with processing capacities. Cheese production is strong to steady but slipping farm level milk output may soon change that.

Butter climbed to $2.73 per pound last Thursday but closed last Friday at $2.68, up 2 cents, reversing two weeks of losses, but 49 cents below a year ago, with 49 sales reported for the week.

Cream availability varies but the holiday weekend provided butter plants extra product. Cream access is slowing and expected to tighten. Recent heat and humidity in the Midwest crimped milkfat output at the farm. Retail butter demand is steadily increasing and food service demand is notably improved, says DMN.

Cream tightness also eased in the West, but post-holiday volumes are slipping. Near-term cream is anticipated to be tight in the West. Spot loads are available but more limited. The tighter availability and higher spot prices are keeping buyers at bay, says DMN. Some report butter output is steady, while others say churning is slower than anticipated due to less cream.

Grade A nonfat dry milk fell to $1.0575 per pound last Tuesday, lowest CME price since Nov. 5, 2020, but rallied last Wednesday, jumping 3.25 cents, and closed last Friday at $1.10, up 2.50 cents but still 47.50 cents below a year ago, on 21 sales.

Dry whey hit 32 cents per pound last Tuesday, highest since May 8, but closed last Friday at 30.25 cents, down a quarter-cent on the week, and 15.50 cents below a year ago. There were 11 sales reported for the short week.

While China's depressed economy and purchases are on everyone's minds, RaboBank released its "Global Quarterly," focusing in part on the milk supply, which is contracting in most key regions like the U.S., European Union and New Zealand. "That sets us up with a supply side that isn't necessarily firm," stated RaboBank analyst Lucas Fuess. "Any sense of a demand recovery, especially if it comes quicker than expected, could mean we have finally reached the bottom on prices."

With China becoming the world's third largest milk producer, global purchases will be reduced, according to RaboBank, but China will not be self-sufficient enough and thus remain a big buyer of dairy products, Fuess concluded.

July milk production in New Zealand was another month of decreased output, according to DMN, and yields were smaller in June and July. Things are a little better in Australia, however. "Even with poor weather conditions in most regions, which has challenged milk production over the course of the 2022-23 season, Australia's milk output ended the season with June up 1.2% however, overall seasonal milk output posted a 5% decline," said DMN.

July's U.S. dairy exports showed a lot of declines from July 2022. Exports totaled 467.8 million pounds, down 10%, or 51.8 million pounds, the fourth consecutive month of double-digit losses, according to HighGround Dairy.

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